Logically, owners of apartments who rent their flats (whether unfurnished or furnished) could be considered like a great partner to the State – not so. For the last thirty years, the real estate laws have infallibly punished that part of the population. How so? First, by changing the very core of ethics, the morality of France. Insidiously, it has become easier and easier for tenants to not pay their rent and get away with it. So much so, in fact, that today it is not criminal to not respect one’s obligation to pay the rent, but it IS a crime for a landlord to want to reclaim his lodging. The proprietor of a flat whose tenant is illegally squatting has to study law in order to battle to reclaim his property!

First, he must write a specific registered letter of « mise en demeure ». Without a response (which never comes, since the misdeed is lawfully tolerated), the owner has to then send a letter of « commandement de payer » through a « huissier » (the French term for a baliff) at a cost of 250 € + VAT at 19.6%. The tenant is reminded of the presence of the « clause resolutoire » in the contract (meaning “termination of the lease at the first unpaid rent,” but a new law has literally canceled that rule out, meaning that, effectively, there is no law to speak of. If the tenant still does not answer – never mind paying the overdue rents – in the next two months, the proprietor of the flat will have to turn to a court of law.

However! Two different courts are involved, depending on whether the debts involved are below 10,000 € or above. In the first case, you don’t need a lawyer, in the second, hiring a lawyer is imperative. Costs, costs, costs…and sleepless nights. During all this time, the tenant is not worried (doesn’t care?) because the courts of laws are inundated and backed up. Plus, the French vacations are long and recurrent; moreover, from the first day of winter to the last (in France, winter goes from November 1st to March 15th, except in Paris where it lasts until April 1st), the tenant is home free! All in all, count at least two years and a lot of white hair.

So when I read in the Figaro this week-end that the Mayor of Paris is going to propose a new law forcing landlords to reduce rents so that more French people can live in town, I say, please stop voting new laws into effect and just respect and defend those who have apartments to lease. You’d be surprised how many landlords would reappear!

More on the subject to come soon…

Yet, far from being grateful to this helpful partner, the government seems to be intent in discouraging , not to say annihilating, the first tax-payer in France !

As an owner of property, the landlord pays an ownership tax (corresponding more or less to one month’s rent), a tax on rental revenues (up to 41% ), a social contribution tax called CSG/CRDS (12,3%), a wealth tax on properties valued above 800,000 € (0,55% to 1,8%), and a capital gains tax on resale – 31,3% for residents, 33,33% for non-residents, and 19% for non-residents in Europe. And to make matters worse, if the tenant does not pay his/her residential tax, the landlord is jointly liable and must fulfill that obligation!

Added to this heavy fiscal responsibility, many obligations have appeared over the last ten years. Upon selling one’s property, the seller has to provide the future buyer with a portfolio of technical diagnosis. This obligation has been extended to having to furbish the new tenant upon each rental with more and more of these diagnoses, thus complicating the landlord’s job and nibbling away at unearned revenues. This portfolio of technical diagnosis is composed of :

• a surface area calculated on the loi Carrez (measurement excluding terraces, walls, closets, stairs, and any space under 1m80 ceiling).
• a diagnostic for termites (valid 3 months)
• a diagnostic for asbestos
• a diagnostic for lead (if some lead detected, valid one year only)
• a diagnostic for natural or technological risks (valid six months)
• a diagnostic for energetic performance (valid ten years)
• a diagnostic for gas installation conformity (valid three years)
• a diagnostic for electrical conformity (valid three years)

and more are to be announced! The cost of these diagnoses can easily reach 2 000 € to which VAT at 19,6% is added.

Unfortunately, the landlord’s burden does not stop there. Taxes increase wheras his/her rights decrease. Over the years, new laws have secured the tenant’s situation, thus reducing the landlord’s room to protect oneself. For example, when choosing a tenant, a landlords is not allowed to ask for :

• a bank statement or attestation from the bank that the account is well-supplied and that no large credit is burdening the account
• a payment by monthly draft
• several months rent in advance, even held into an escrow account
• a recommandation from a previous landlord or confirmation that all rentals have been paid
• a copy of his/her criminal record
• a photograhy, except that of his/her passeport
• his/her social security number

The security deposit, in the case of an unfurnished rental, has been reduced from two months’ rent to one (excluding maintenance charges). In case of non-payment of rent or of repairs due to the tenant’s responsibility, the landlord’s guaranty will not cover the maintenance charges at all and be barely sufficent to cover repairs, let alone any unpaid rent !

Due to a rise in non-payment of rents by tenants, the government has invented and backed a new insurance as preventive protection against insolvent tenants. Called GRL, at a cost of 4% of the annual rents, this insurance is to be subscribed… by owners! Needless to say, the success of this formula has not been stupendous, especially so because suscribing for the GRL, no longer entails the landlord to ask for another guaranty, such as a bank guaranty or a guarantor.

No guaranties or hardly any, make for encouragement of delinquency. Expulsions of non-payers have risen by 157% in 10 years. But these numbers hardly reflect the extent of the problem. For it is such a hassle for landlords to get to that point that many give up and sell their property never to be a landlord again ! A law protects non-paying tenants during four months and a half in the winter (Nov 1st to March 15th) a period that many undiscrete tenants wait for in order to suspend their payments. But, in order for prejudiced landlords to get to the expulsion point and recuperate their apartment, they have to get a decision of justice. This procedure can take 18 to 24 months during which landlords get no rent, pay maintenance charges, all due taxes (including the tenant’s residential tax), legal costs, and mortgage to boot !

Often, landlords have invested in real estate in order to secure their retirement. If they have borrowed money to acquire their investment, they can be ruined – a situation which often leads to disastrous family and health consequences.

Twelve years ago, the gross profitability for real estate investments would oscillate between 8 and 10% for the owner. Today, owners are lucky to get 3%.

The rental market is diminishing fast, leaving millions of people stranded and looking for a place to live, especially in cities, and in Paris most of all.

Would you like to become a landlord in France?

@ copyright Claire de Circourt

In France, all properties put on the market either for rent or for sale must have a diagnostic assessment of its energy consumption performed by a designated professional, but as of January 1, 2011 this assessment must be included in any and all real estate advertising.  Why?

Since July 2007, it had already been mandatory for the owner of real estate properties to provide the buyer (in the case of a sale) or the tenant (in the case of a rental) the DPE (Diagnostic Performance Energetique), a diagnostic that most people don’t know how to read or don’t give a hoot about. When you are desperately looking for a place to live – especially in a city – all you care about is the location, the size and the monthly rent!

The redundancy of this new obligation is therefore perceived as a new strain. For the owner, the cost of the diagnostic (about 450 € for 100 square meters) adds up to the seven diagnostics created since 1997 (legal square footage, termites, asbestos, lead, risk appraisal for natural catastrophes, gas and electricity installation), but the cost of the ad’s additional lines is absurd and unfair, for – would you believe? – the legislator has devised the size of the notice! For a print ad, « the title ‘class energy’ must be in capitals and its font size must be at least equal to that of other words ». Placed in a real estate agency, the ad « must be in color and occupy at least 5% of the total advertisement ». Appearing on internet « the size must be 180 pixels x 180 pixels ».

While trying to make sense out of these dictatorship-like instructions, time and money are being wasted. What’s more, most proprietors don’t know who to go to for this DPE, as they constantly hear that many crooks have opened shop since the flood of diagnostic requirements. Where to go, whom to trust, especially when, as thousands of owners, you are over eighty years old and an easy target?

As far as the real estate agencies are concerned, this new obligation is equally costly.  After accommodating the computer programming to include this new information, it is now necessary to call each and every owner who, so far, have been satisfied with waiting until a buyer or tenant made a serious offer for their property before getting involved in this headache-inducing task.  A thousand calls will be necessary in order to bring the agencies’ listings up to par.  These calls will be lengthened by the questions of uninformed proprietors asking equally uninformed agents to explain to them how exactly one obtains the greenhouse emissions en KgCO2/m2/year?

While everyone is trying to make do with this incongruous way of getting people involved in the Grenelle environment act, no one is actually working on or investing in the problem!  Moreover, all tax rebates on environmental renovations have been eliminated this year. And, of course, while fighting to survive the red tape and the numerous inspectors who won’t miss this new occasion to verbalize and penalize, people are not creating riches. Ordering the citizens to pay for diagnostics, expanded ads, VAT at 19.6%, and other miscellaneous charges, is not what’s going to keep France afloat.

« God forbid that French people are left to work in peace! »  I tell myself while drinking a beer on one of the well-heated outdoor sidewalk cafés on the Champs Elysées, and calculating, for the third time, the contribution of these gas parasol-like heaters to the environment: 20 terrasses x average surface x number of apparels per square meter x KW consumption x average daily use x CO2/KWh = ….?!!!

Parisian real estate properties can be divided into three categories: prevalent properties up to one million Euros; middle scale luxury (1 to 3 million Euros); and high scale luxury (3 to 20 million Euros) properties.

The first category comprises French owners who for the longest time have invested in real estate for their own occupancy, their children’s, and for what they considered to be a complement to their retirement benefits by renting it out.  But, as France favors the non-paying tenants, no one wants to be a landlord anymore.  And since fiscal dispositions concerning real estate change constantly, becoming obsolete every two years, many owners choose to part with their real estate other than their home.

A younger clientele (one buyer out of five is less than 30 years old) has taken advantage of an exceptionally low credit rate:  3.22 % currently, and the lowest since the end of World War II.  But these young buyers relinquish 3.93 years of revenue to credit costs and tie themselves up for an average of 222 months (nearly 19 years).  For them, buying a home is not an investment.  When they’ll sell to buy a new home, any capital gains will immediately be absorbed by real estate inflation.

The second and third categories are another ball game altogether. Foreigners invest in the real estate everyone wants: good location, old stones, charm, sun and view, garden or terrace. More than ¾ of investors in France come from Europe. In Paris, Italians are predominant, ahead of Americans or British investors.  In Paris’ first district, for example, one buyer out of two is Italian!

In high scale luxury real estate, all Parisian real estate agencies are prompt to recognize that French industrials who have made their fortunes in global markets are taking Paris by storm, vying with millionaires and billionaires from Russia, China, India, or Brazil.

Paris seems to be for the taking, then, rather than for the living.  Most French people spend hours in trains trying to reach less-coveted areas.  Yet, it is people who give life to a city and not investors who are rarely there: they travel, they live inside fancy restaurants, taxis, expensive shops, hotel rooms, and do not form the living compost which makes for a vibrant city.  Rumour has it that nightlife has disappeared in Paris and that fun is to be found in London, Berlin, Rome or New York, instead. Will Paris keep being worth all that money without life?

Judging from the number of sales which leaped 104% compared to 2009, one has to assume YES!  Yet, starting 2011, higher taxes on capital gains and a social contribution of 12% to boot might discourage many an investor, but not the very rich plagued by having to put their money somewhere.

More to come on the subject in January 2011….

Numbers are horrendous! In France, a fire due to domestic causes happens every two minutes. One fire in 4 is due to electrical deficiency; one in 6 is due to smokers (smoking in bed, emptying an ashtray too soon, etc.); one in 8 happens in the kitchen.

Because of negligence, 250 000 residences a year are damaged, 10 000 inhabitants are injured, some 3 000 are disabled, and 800 are killed.

Any responsible adult, for the well-being of his family, should see that a detector is fixed on the ceiling of both the living room and in the kitchen of his home. Theses fixtures are readily available in all department stores and in the French « drogueries ».

But, most of all, if you rent and entrust your apartment to an expatriate, you should think of protecting this person, and your flat, for you don’t know his/her habits. When I lived in the United States, I remember that in most homes all the lights were on, even when one would go out for a while. Yet, it is when too many lights and electrical elements are on all together that a fire can start in a home lacking sufficient electrical power.

So beware, protect your tenant (you would not want to have to call his/her family), and make sure your furnished apartment stays so!

However, to come out of the house is expensive, and one wonders how the underprivileged children – the inhabitants of the feared and underdeveloped suburbs – and the large families can expose their children’s minds to anything.

Having been entrusted with the care of my seven-year old Goddaughter for a week this summer, I had the immense duty and privilege of trying to expand her horizon.  The first day, we went to the « Trocadero Aquarium ».  While waiting in line, I prepared a twenty-euro bill and almost gulped when, my turn having arrived, I was told “28 € please!” My first thought was: How do large families do it? They don’t!  The place was filled with single-child (occasionally two-children) families.  That being said, the place is fantastic and one can easily spend the day there – for parents, the wonderful films showed in the auditorium; for kids, the « caress reservoir » where they are allowed to pet the fish that, in turn, seem to take great pleasure at avoiding being patted.  On our way out, Rosalie begged for a coloured fish souvenir which, for 4€50, I could not refuse.

The next day, we went to the « Jardin des Plantes » where the « Ménagerie » attracts children like flies on honey. “16 €, please!” Again, no large families in sight.  Although the ticket specifies its validity for the day, it does not allow one to exit for a break (lunch for example) and to return later.  This makes the visit tedious after awhile, for there is a lot to see and Rosalie, although complaining of fatigue, insisted on not missing any of the 3,000 residents of the zoological garden.  In the end, we were both so tired that the fun was spoiled.

On the third day, we went to the « Planetarium » in the « Palais de la Découverte ».  Although we only intended to visit the planetarium, for Rosalie’s little legs were reluctant to more discovery, we had to pay “11,50 € please” to enter the Palais plus 9 € extra to enter the planetarium.  The experience is worth it, even if at first one feels cheated.  Do sit on the North side of the room if you wish to see the moon and sun rising without being inconvenienced by the huge « sky projector ».  Upon leaving, we had to stop at the shop where I had to buy a dinosaur’s drawing book for 12,90 €.

On the fourth day, we took a « Bateau-Mouche » on the Seine.  “15 €, please” plus a bag of popcorn at 4,50 € in the near-by shop, and we were on our way!  Except for the continuous flow of unintelligible words from the loud-speakers offending the peace of gliding on water, the trip was fun and the bridges of Paris, seen from underneath, were awesome.

On the fifth day, we went to the movies to see « Cats And Dogs: The Revenge Of Kitty Galore » in 3D.  “16 € please” for the tickets plus 2 € for the loaned 3D glasses.  I had to stuff Rosalie’s ears and mine with Kleenexes in order not to irreversibly damage our eardrums.  I suppose this was the reason why, staggering out of the movie room, we hardly talked about the show and were glad it was over with.

All in all, just to get out of the house five days in a row, cost over 120 €, for one child only and her chaperone.  Add to this cost the transportation fares and the unavoidable ice-cream cone and you reach 140 €.  Quite a budget!  No wonder that, even in socialist France, there are so many children whose minds are never exposed to neither culture nor fun expeditions.  That makes for violence and frustration later on, and that is where the seed of rebellion starts.

In July 2009, a step needed for the business – and good for President Sarkozy who had the guts to do what was promised by his predecessor for seven years – was taken.  After a long-fought battle, restaurants obtained a reduction of the VAT applied to food from 19.6% to 5.5%, which gave them a bit of oxygen, so to speak.  In return, it was implied that the restaurants would lower their prices (so that people would frequent restaurants more often), and that they would create jobs.

After only one year – the French government having a tendency to react impulsively – this very smart decision is becoming an issue again.  Yet, if we look at the just-born advantages of this stepping stone, we see that in one year’s time:

-       Restaurant bankruptcies have decreased by 17%

-       More than 23,000 jobs have been created.

The trend is definitely catching on!

Yet, restaurant owners are being targeted because some have not cut prices enough (meanwhile food costs rise every month for them), and others have decided to use this extra « oxygen » to better remunerate their personnel (so hard to find these days) or to hire.  And some did not follow the trend because they were already near strangulation.  In other words, the French government wishes to go back on a good decision simply because restaurant owners have not saved the restaurant business!  This over-simplified rationale proves that there is no reasoning at all.

Food is not where the gains lie.  Once you have paid the « chef », the waiter(s), the dish washer, the owner, the social charges on these people (52% above their salary), the food, the cutlery and dishes, the rent and affiliated overhead and upkeep, and all taxes, what the restaurant makes on an 18 € average dish is next to nothing and can even be a loss.  We all know that the profit is made on drinks whether it is bottled water, sodas, beer and wine – items which have remained taxed at 19.6%.

At the same time, food is what makes people go to “eating places”!  Restaurants play a very important social role in society.  It is where people gather, where lovers reunite, where couples talk away from their cramped apartment, where large screens reunite sports aficionados, and last but not least, where people do business!  Moreover, let’s salute all the restaurant owners who have the gift for creating a warm, care-free zone where one can relax – an added value we all crave.

Therefore, if people don’t go to the restaurants much anymore, it is simple mathematical logic:  they are broke!  After all, aren’t we in the middle of a serious economic crisis?

Of course, ministers and other high-ranked civil servants of France cannot easily appreciate the difficulties restaurants encounter since their nearby canteens, the « Laurents » and « Arpèges » are always full.  But for us, the French consumers, cafés, brasseries and « on the corner » restaurants must go on.  They are our oxygen.

Yet, when one hears the arguments justifying this abhorrence for the rich, nothing is said about the individuals or families who began with nothing and built a small (or large) empire, often within two generations. No recognition is given to these people who have contributed to the well-being of France in terms of providing jobs and paying taxes. Why? Because these industrious men and women are much too busy working to be in the newspapers!

So then who is the object of such resentment? The politicians are.

When a former Minister of Culture thinks he is above the laws and walks his dog in the Palais Royal Park (an action totally forbidden to the French citizens), soreness sizzles. When past Prime and other Ministers and past Presidents of the Assemblée Nationale or of the Senate (though perhaps long forgotten) continue having two republican vigils in front of their door until they die, grudges harbor. When anyone who gets a new post in government is immediately propelled to a way of life worthy of ancient royalty yet without having proven any capacities in the job, resentment boils.

When these men and women, most of whom have never earned their living, boast an attitude of “Don’t you know who I am?” with the people who are paying for their privileges, rage flurries. The most expensive restaurants are full of these parasites while the general crowd restrains itself year after year. Politicians flaunt themselves with their big cars, forcing other drivers to yield to them too often to seem justifiable, relishing their unearned comfort while doing nothing for the millions who are held hostage in subways and RER trains, crushed like passengers on their way to the camps, exhausted and resigned except for their rage which eats away at them like a cancer.

Too tired to differentiate between those who have earned their riches and those who have taken those riches from them (without offering contributions in exchange to improve the public’s quality of life), French people hate the rich altogether. Even more pernicious, the politicians themselves point their fingers at the CEO’s earnings or at the tax deductions allowed to investors, as if to deem those contributions or initiatives a sin while simultaneously preserving their own incongruous wealth.

As it is, the economically well-to-do leave France and spend their money elsewhere while the remainder of the French population is stuck with the politicians living the high life and squandering France’s assets!

A little humility and modesty from politicians in view of their exceptional standard of living during these hard times would probably calm the unrest of the population to some extent. But most of all, modeling the example instead of being the exception to all the rules and laws of France would be a good start to reconcile the people with the political “class”.

Reading the Figaro over the weekend, I discovered that one of these brains was being honored for the discovery of a 3D mouse. I felt proud and spirited to realize how extraordinary it is that a young French man, Eric Delattre, up against all the Silicon Valleys of the world and their extraordinary means, came up with this fantastic invention.

The 3D mouse accelerates the entire design and creation processes and revolutionizes navigation in 3D environments. In a few words, unlike traditional mice which are limited to two axis movements, this 3D mouse allows the user to navigate easily and intuitively in three dimensions using all six degrees of freedom (three translations and three rotations), and reduces the number of complex and repetitive gestures: use of both hands, keyboard shortcuts, and mouse combinations. The Lexip 3D mouse establishes new standards in the history of input devices that had not much evolved in the past forty years.

We Parisians probably met this walking brain on our way to work! I will never cease to be amazed.